Intel seen picking Ireland over Israel for upgrade

The Israeli government gave the company's $600 million grant application for a new generation fab the cold shoulder.

Intel Corporation (Nasdaq: INTC) has picked Ireland over Israel as the site for its next generation fab. Sources inform ''Globes'' that Intel is leaning towards Ireland for the upgrade of a fab to production of 15-nanometer technology wafers, which will replace the current 22-nanometer technology wafers made at the company's Fab 28 in Kiryat Gat.

In June, Intel Israel asked the Investment Promotion Center for a $600 million grant to upgrade and expand Fab-28. Intel said that the project would create its most advanced fab in the world, and that the company would invest $4.8 billion of its own money in it. In exchange, Intel promised to hire 1,300 more workers.

This was Intel's fourth grant application since the mid-1990s. The previous grant, in 2000, totaled $200 million. Intel has invested $2.7 billion in the Kiryat Gat fab.

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Intel's grant application was given the cold shoulder by the Ministry of Finance and the Ministry of Industry, Trade and Labor, because of the frequency of the applications for its fabs. Government sources told "Globes" at the time that the government should review its grants policy, and that if it was prepared lay on the table another a huge grant for Intel, it should open it up to a tender among other multinationals in exchange for investing heavily in Israel.

One source said, "Intel has gone as far as it can go at Kiryat Gat, and if the company wants to develop its operations in Israel, it should do so in other locations, such as in the north or in an Arab town."

In July, the Ministry of Finance and the Ministry of Industry made a counteroffer to Intel Israel: in exchange for new investment in Kiryat Gat, it would receive a relatively meager NIS 1 billion grant, of which NIS 700 million would be used to set up operations in Beit She'an, and the rest for upgrading Fab 28. The idea of setting up shop in Beit She'an was intended to create jobs there.

Intel Israel thoroughly reviewed the proposal, and general manager Maxine Fassberg and other executives toured the proposed site, including its water and electricity infrastructures and access roads.

A senior government source involved in the talks with Intel told "Globes" today that the company decided to upgrade its Irish fab instead. "Intel will only officially announce its decision at the end of the year, but we understand from the spirit of the talks that it's going to Ireland."

The sources made it clear that, despite Intel's decision to upgrade its Irish fab, the ideal of building an assembly plant in Beit She'an is still on the agenda, and that the Investment Center never linked it with the proposal to expand the Kiryat Gat fab. "On the contrary," said a source, "From what we've heard in recent weeks from the company, it is very interested in this option, and it strongly wishes to move forward in negotiations on an agreement for possible future operations in Beit She'an."

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